>>40+% lower $us<<
This is way too pessimistic in my opinion. The dollar is the world's reserve currency and the US is the world's leading economy. Long-run returns on investments made in US dollars in the US economy will outpace investment returns made anywhere else in any other currency for the foreseeable future. The strength of the dollar is our reward for the triumph of capitalism over communism at the end of the cold war, for the (relative) lack of corruption in our capital markets and for the US entrepreneurial spirit.
We are in for some hard economic knocks in the short-term as the malinvestment of the late '90s is unwound. I believe we will see a nasty recession stretching into 2002. But a 40% decline in the dollar? No way, imho.
Let's remember who our competition is. The Euro is the currency of an economic bloc that has always struggled under a heavy blanket of socialist ideas and is now adding another significant layer of government meddling and bureaucracy. A single European Central Bank setting a single monetary policy for twelve (thirteen?) different countries will guarantee continual economic imbalances in Europe, as certain countries boom while others are in recession under the same monetary policy. Europe does not have the labor mobility to prevent this.
Japan is still in the grip of a debt-induced decade long recession that deeply-rooted cultural beliefs make it nigh impossible for the Government and Central Bank to bring to an end. Canada has emulated European culture and a European style of government to its own detriment. Australia and New Zealand are too small to matter. Most of the rest of the developed world - Mexico, the countries of South America, Southeast Asia and the former Soviet Bloc struggle with varying combinations of monetary policy mismanagement, crony capitalism and systematic corruption. China has potential but is hobbled by low levels of education and more crony capitalism and corruption. Africa? Poor Africa. India? Pakistan? The countries of Eastern Europe and the Middle East?
So where you gonna put your dough? The almighty US dollah, the greenback.
And as for gold? In all the discussion on this thread I have not yet seen quantitative mention of the most important data - the decline in the average cost of gold production over time. Various new technologies have made gold significantly cheaper to produce. The unwinding of the gold carry trade that seems to be taking place is providing an upward push to prices and may continue to do so. Increasing demand may push the POG up somewhat. The current spike in POG is probably a result of a fear-induced and opportunistic first-time foray into gold by new investors and is likely to be short-lived. Gold is now a commodity whose price is set by the cost of production of the marginal producer at the point where supply and demand are in balance. Anyone looking for $400, $500, $600 gold will continue to be disappointed, I believe. The future will likely look like the past for the POG, imho. |
